Our key takeaway: The EU Social Taxonomy has the opportunity to define global standards for investors on both environmental and social sustainability, but doing this effectively requires an approach grounded in human rights principles and with recognition of the links between human well-being and environmental sustainability.
Six NGOs—namely the Business and Human Rights Resource Centre, EIRIS Foundation, Investor Alliance for Human Rights, Share Action, Workforce Disclosure Initiative and World Benchmarking Alliance—released a statement supporting the EU’s development of a social taxonomy “based on global social and human rights norms” (read more about the EU Social Taxonomy in our previous update). So, what are the NGOs calling for in practice?
- “Scope of the social taxonomy and relationship with the environmental taxonomy”: The social taxonomy should “[cover] contributions to social and human rights objectives in all sectors, not just those meeting basic social needs.” In addition, both the social and environmental taxonomy should be “integrated and complementary. ‘Environmentally sound’ activities will not be sustainable if based upon poor working conditions, or harming customers or communities.” What’s more, the group supports “Do No Significant Harm (DNSH) criteria building on and expanding the existing minimum social safeguards in the environmental taxonomy.”
- “The horizontal dimension (processes and practices)”: The horizontal dimension of the proposed taxonomy structure considers impacts on different stakeholders affected by economic activities, such as workers, consumers and communities. The NGOs call for three core elements to be included: (1) “Stronger minimum standards on living wages, working hours and tackling precarious work are needed in addition to clarifying expectations on human rights due diligence and core labour standards in the DNSH criteria making sure that human rights due diligence is a comprehensive and ambitious requirement”; (2) “More focus is needed on creating opportunities and on promoting diversity and inclusion covering ethnicity and other identity characteristics as well as gender in defining substantial contribution”; and (3) “Just economic transitions should be a major focus of the proposals on communities.”
- “The vertical dimension (impact of products & services)”: The vertical dimension focuses on access to products and services for basic human needs (e.g. water, food, housing, healthcare, education) and basic infrastructure (transport, telecommunications, clean energy, financial inclusion, waste management). The NGOs call for three core elements: (1) “Accessibility, Availability, Acceptability and Quality (AAAQ) of products/services meeting basic needs should be analysed globally, not just in Europe, when defining substantial contribution”; (2) “Significantly harmful products should be identified based on clear evidence of the product’s detrimental impact, or where their use is contrary to international agreements and norms and, where the harm relates to excessive use, there should be steps identified that business must take to avoid that harm”; and (3) No “blanket bans on products made in emerging markets where the social challenge (which should be tackled in the horizonal dimension) is ensuring good social standards in supply chains, not product impact.”
For more, see Business and Human Rights Resource Centre, EIRIS Foundation, Investor Alliance for Human Rights, Share Action, Workforce Disclosure Initiative and World Benchmarking Alliance, Statement on the EU Social Taxonomy (September 2021)
